New South Wales Supreme Court CITATION : Rob Nichol Pty Ltd v Australia NID Pty Ltd [2000] NSWSC 860 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 11200/98 HEARING DATE(S) : 16 August 2000 JUDGMENT DATE : 31 August 2000 PARTIES : Rob Nichol Pty Limited (Appellant) Australia NID Pty Limited (Respondent) JUDGMENT OF : Studdert J LOWER COURT Local Court JURISDICTION : LOWER COURT 34/96 FILE NUMBER(S) : LOWER COURT R. Wakely JUDICIAL OFFICER : COUNSEL : R.R. Harper/J. Gillespie (Appellant) C.R. Burge (Respondent) SOLICITORS : Edmunds & Company (Appellant) Vandeness & Scott (Respondent) LEGISLATION CITED : Supreme Court Rules Forslind v Bechely-Crundall (1922) SC (HL) 173 CASES CITED : Laurinda Pty Limited v Capalaba Park Shopping Centre (1989) 166 CLR 623 Satellite Estate Pty Limited v Jaquet (1968) 71 SR 126 DECISION : See para 24 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION STUDDERT J Thursday 31 August 2000 11200/98 ROB NICHOL PTY LIMITED v AUSTRALIA NID PTY LIMITED JUDGMENT 1 HIS HONOUR: This is an appeal by way of stated case. 2 The appellant, which company was the plaintiff in the Local Court, sought the relief identified in the amended stated case as being "for unpaid rent and expenses for breach and repudiation of a lease". 3 It appears from the stated case in its amended form (and it is to that amended document that I will subsequently refer) that the respondent owned land at Salamander Bay known as Horizons Estate and that the respondent was developing a residential estate and golf course there. It entered into an agreement with the appellant builder to sell to the latter a lot in that estate, with a view to the appellant building an exhibition home on it to be then leased back to the respondent for use in its development project. In an exchange of letters referred to in paras 5 and 6 of the amended stated case, the appellant wrote: "It is agreed that our client company shall have the right of access to the dwelling to be erected, for the purpose of the introduction of potential building clients and the display of our client's activities and the promotion of the building of the homes generally by our client company. Our client acknowledges that it will not unreasonably interfere with the use of the premises by your client." And the respondent replied: "Our client agrees that your client shall be allowed limited access to the premises, by appointment, for the purpose of showing it to potential building clients. However, your client shall not be allowed to install an office or office facilities, and our client shall always be entitled to refuse admittance if, it is opinion [sic], admittance would interfere with its use and occupation of the premises." 4 Contracts were duly exchanged and the sale to the appellant was completed on 30 April 1993. On that date the appellant and the respondent entered into a lease of the premises which the appellant was constructing in which the use to which the premises were to be put was expressed as follows: "The premises shall be used only as a display home and sales office." 5 According to the stated case, a display home was completed either in late July or early August 1993, and the appellant's solicitor advised the respondent by letter of 11 August 1993 that the property was ready for occupation pursuant to the lease. 6 It is recited in para 12 of the stated case that the respondent never took possession, although in para 13 it emerges that between 9 and 29 August 1993 "McCloy's, agents of the Mortgagee of the Respondent" used the property to assist in the auction of a number of lots on the estate owned by the respondent. Plainly, it would have been in the respondent's interests for McCloys to have used the display home for the purpose found by the learned magistrate but it is not made clear in the stated case what the arrangement between the agent and the appellant was in respect of such use. The magistrate's judgment was tendered by consent and it identified a document tendered as Exhibit 11 relating to McCloys' use. That document was tendered by consent for the purposes of the proceedings in this Court and has been marked Exhibit J. It is a letter from real estate agents addressed to Mr Nichol of the appellant company and it reads: "I confirm our conversation yesterday whereby you requested clarification of rent payment for your above premises. I confirm that Australia NID Pty Ltd have agreed to allow D.F. McCloy's agent to use the premises for the auction advertising period i.e. Monday 9th August 1993 to Sunday 29th August 1993. I am aware that the cost of same is $300.00 per week (total $900.00) and confirm that this will be paid shortly after the auction day. McCloy's and their agents involvement with the premises is for the above period only, and it is agreed that any other arrangements and or lease agreements are between Australia NID Pty Ltd and yourself." 7 Not only did the respondent in the magistrate's judgment not enter into possession but it never made any payment of rent under the lease. The magistrate however concluded that it did not become liable under the lease because the appellant had repudiated the contract and it followed from this that the appellant's claim failed. 8 It is the appellant's contention that this decision as to repudiation was erroneous in law. Mr Harper submitted that it was not open to the learned magistrate to conclude that the appellant had repudiated the agreement and that, indeed, on the facts found the correct conclusion was that it was the respondent which repudiated the claim. He submitted that the contention by the appellant that the use of the demised premises as a sales office be restricted to the garage went to use only, and did not challenge the right to exclusive possession over both house and garage as conferred by the lease itself. The magistrate's finding, he contended, blurred the distinction between the right to exclusive possession and the permitted use in the exercise of the contractual right. Mr Burge submitted to the contrary, and that it was open to the magistrate to find that the appellant had repudiated the lease. 9 The question of whether the stage had been reached when conduct amounts to repudiation is a question of fact: see Forslind v Bechely-Crundall (1922) SC (HL) 173 per Lord Shaw at 191-192 and Laurinda Pty Limited v Capalaba Park Shopping Centre (1989) 166 CLR 623 at 659, and this is a significant consideration having regard to the limited nature of this appeal and the competing submissions on repudiation. 10 Mr Harper submitted that the conclusion for which he contended was the correct one by reason of the facts already outlined, together with paras 14 and 15 of the stated case: "14. A meeting took place on 19 August 1993 in which the Respondent's representative tried to negotiate the alteration of the terms of the usage, in particular, they wished to use the property for the purpose of accommodation of visiting Japanese associates. 15. By letter dated 24 August 1993 the Respondent sought to re-negotiate the terms of the Lease (Ex 10)." 11 The letter referred to in para 14 was also tendered by consent in this Court and reads: "As discussed in our meeting of Thursday 19th August 1993 we would like to renegotiate the terms of our lease arrangement with you in regard to the above property. Currently, as it stands, we really only have the use of the garage as a sales office for $300-00 per week. Our original understanding of the lease was that we could also use the house for this purpose. We feel that this arrangement is not acceptable to us under present circumstances. We also see that the 'display house' is more for your benefit than it is for ours. Despite this, we feel obliged to continue our arrangement. However, we would like to change some conditions: 1. Use of garage for sales/display - as understood. 2. Use of the house for staying guests at mutually convenient times. These would not be for long period[s] and we would be in a position to always give at least 2 (two) weeks notice. There may be some need for occasional weekend use although we would endeavour to use mid weeks for this purpose. 3. We would be responsible for all cleaning, laundering of bed linen and presentation of the house after such stays. We would assume that under other circumstances you would be responsible for upkeep. We would also be responsible for presentation and cleaning of the garage. 4. We would also request that you reconsider the terms of the lease. We would be happy to continue for 6 months with these changed conditions and for us to re-assess the arrangement at that point. This would give you the option of either finding another tenant or selling. We trust that you will consider this proposal." 12 Mr Harper submitted that the following matters amounted to repudiation by the respondent: 1. The failure of the respondent to go into occupation; 2. The suggested alternative use of the house as accommodation for guests; 3. The request for reconsideration of the terms of the lease; 4. The delay and "shilly-shallying" evidenced by the above. 13 In the course of his submissions, Mr Harper referred, inter alia, to Satellite Estate Pty Limited v Jaquet (1968) 71 SR 126 and to Laurinda Pty Limited v Capalaba Park Shopping Centre (supra). In Jaquet Asprey J said at 150: "It may be readily conceded that there was on behalf of the respondent no distinct refusal in terms to perform the obligations of the contract by which it was aware that it was bound, but in the absence of such a refusal the conduct of the respondent must be looked to to ascertain whether it had sufficiently evinced an intention no longer to be bound by the contracts provisions (see Rhymney Railway v Brecon and Merthyr Tydfil Junction (1900) 69 LJ Ch 813 at 818; Dimond v Moore (1931) 45 CLR at 166; Carr v J.A. Berriman Pty Limited (1953) 89 CLR at 351-352…Delay in performance of a contractual obligation in itself may amount to a refusal to perform it (see Holland v Wiltshire (1954) 90 CLR 409 at 420 per Kitto J). Moreover, where the conduct of one of the parties to a contract has been such as would lead a reasonable person to the conclusion that he does not intend to fulfil his part of the obligation, the other party to the contract, whatever in fact may have been the actual intention of the former, may treat such conduct as an intimation that the contract has been repudiated (Forslind v Bechely-Crundall (1922) SC(HL) 173 per Viscount Haldane at 179, per Lord Dunedin at 190 and per Lord Shaw at 191). 14 In Laurinda (supra), it was emphasised that repudiation depended upon objective facts and circumstances. In their joint judgment Deane and Dawson JJ said at 657-658: "Lord Wright's oft-quoted admonition that 'repudiation of a contract is a serious matter, not to be lightly found or inferred' (Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co. [1940] 3 All ER 60 at 71), is, no doubt, a wise one. It should not, however, be allowed to cloud the fact that an allegation of repudiation of contract in a civil case does not involve an assertion that the alleged repudiator subjectively intended to repudiate his obligations. Thus, it is of little assistance in the present case to identify reasons why the lessor was unlikely to have subjectively desired to repudiate its agreement to grant a lease. An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention. The question is what effect the lessor's conduct 'would be reasonably calculated to have upon a reasonable person' (per Lord Herschell LC, Carswell v Collard (1893) 20 R (HL) 47 at 48; Forslind v Bechely-Crundall (1922) SC (HL) 173 at 190. It sufficies that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it… It is not necessary for repudiation of a contract that the repudiator make plain that he will never perform his contractual obligations at all. What Lord Dunedin described (Forslind (1922) SC at 190) as the assumption of a 'shilly-shallying attitude in regard to the contract' and what Lord Shaw of Dunfermline ((1922) SC at 192) called 'procrastination… persistently practised' can, in some circumstances, reach the stage of repudiation even though accompanied by assurances of ultimate performance at some future time. In that regard, the law was correctly stated by Lord Shaw in the following extract from his judgment in Forslind (1922) SC at 191-192 which is directly in point to the circumstances of the present case: 'If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: "My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract existed which bound him"… In business over and over again it occurs - as, in my opinion, it occurred in the present case - that procrastination is so persistently practised as to make a most serious inroad into the rights of the other party to a contract. There must be a stage when the person suffering from that is entitled to say: "This must be brought to an end. My efforts have been unavailing, and I declare that you have broken your contract relations with me."' 15 Consistently with the statements of principle to be drawn from the above dicta, Mr Harper submitted that the matters upon which he relied established repudiation by the respondent. Mr Burge, on the other hand, submitted that the evidence did not warrant a conclusion that the respondent had repudiated the agreement by the time the letter of 24 August 1993 was written and, indeed, he relied upon some of the content of that letter as an acknowledgment by the respondent that it was bound by the lease. To begin with there is the statement "We would like to renegotiate the terms of our lease arrangement" and later there is the assertion "We feel obliged to continue our arrangement." 16 So far I have addressed only the competing arguments as to whether the respondent repudiated the lease. What was the basis upon which the learned magistrate found that the appellant's conduct amounted to repudiation? This requires consideration of that part of the stated case headed "C. Grounds for Determination": "1.1 Were the Respondents entitled to exclusive possession of the property which entitled them to use the entire property as a sales office and display home? (a) I held that the Respondent was entitled to exclusive possession pursuant to the terms of the Lease. (b) I held that the use referred to in the Lease was 'use as sales office and display home'. 1.2 If the answer to 1.1 was 'Yes' were the Respondents denied possession for the use of the premises as 'sale office and display home'? (a) I held that the use was 'as a display home and sales office'. (b) I held that the Appellant restricted the Respondent to the area of the garage for use as a sales office. (c) I held that if the Respondent had attempted to take possession of the premises as at 19 August 1993, they would not have been given exclusive possession with the use of the whole of the premises as a sales office. 1.3 If the answer to 1.2 was 'Yes', what effect did this have on the agreement between the parties? (a) I held that by insisting that the business activity of sales be restricted to the garage, being a restriction clearly not provided in the agreement or contract, had indicated an intention to the Respondent of not fulfilling their obligations under the agreement. (b) I held therefore that the Respondent was entitled to have taken the Appellant to have repudiated the Lease. (c) I also held that the action of taking possession of the premises, without answering the letter of 24 August 1993 was further evidence of repudiation." 17 1.3(c) above has to be read in conjunction with para 16 under the heading "B. Facts". That reads: "The Appellant took possession of the premises after completion of the auction conducted by McCloys at the end of August 1993." 18 Mr Harper submitted that there was no evidence to support the findings set out in para 16, and, if this be so, this amounted to an error of law affecting the decision reached by the magistrate. Unfortunately, the stated case does not identify the facts supporting this finding made by the learned magistrate. Nor, indeed, does the stated case identify the facts supporting the finding in para 18, a further finding challenged by Mr Harper: "The evidence establishes that the Plaintiff denied the Defendant the use of the whole of the premises." 19 Regrettably, I have concluded that the stated case does not state the facts sufficiently for the Court to determine the issue as to whether the decision of the learned magistrate was erroneous in point of law. 20 Part 32 r 7(1) of the Supreme Court Rules provides machinery for addressing the problem that has arisen. This provides as follows: "Where it appears to the Court that a stated case does not state the facts and documents sufficiently to enable the Court to decide the questions arising or otherwise to hear and determine the proceedings on the stated case, the Court may - (a) with the consent of all parties interested, add to or otherwise alter the stated case; (b) send the stated case back to the Division or court in which it is stated or to the judge, justice or person by whom it is stated for the purpose of addition or other alterations; or (c) receive evidence, make findings of fact, and add to the stated case in accordance with the findings of fact of the Court." 21 The application of r 7(1)(a) has not been enlivened by the consent of the parties and it has not been practicable to use r 7(1)(c). Mr Burge was understandably not in a position to address the issue, having no access to the transcript. This leaves only the course provided by Pt 32 r 7(1)(b), namely to send the stated case back to the Local Court for the purpose of adding to it by identifying those facts upon which the findings shortly expressed in paras 16 and 18 were based. 22 It is most unfortunate that it has become necessary to adopt this course, because this must increase the costs of the appeal process in a claim where the amount at issue is only $22,000. I am mindful also that if the magistrate has erred in law there will ultimately be a need to remit the matter to the Local Court for the assessment of damages. 23 Notwithstanding the course that I have decided must be taken, I have taken the unusual step of outlining the issues presented in considerable detail. The parties may wish to take the opportunity to reflect upon the economics of this litigation and perhaps to explore the possibility of some compromise. 24 The formal orders which I make are the following: 1. The stated case is remitted to the Local Court at Raymond Terrace and to the justice by whom it is stated for the purpose of adding to it in the following respects: (i) by identifying those facts supporting the finding in para 16 that the appellant took possession of the premises at the end of August 1993; (ii) by identifying those facts supporting the finding that the plaintiff denied the defendant the use of the whole of the premises. 2. Costs of the remission to be costs on the summons. 3. I grant the parties liberty to apply within seven days in the event that, having regard to what I have written, there is perceived to be a need to further add to the stated case. ********** Last Modified: 09/27/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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